Financing Your Solar Installation: Smart Options for Long-Term Savings

1. Capital Expenditure (CapEx) Financing

CapEx financing involves purchasing your solar system outright. While this may require a large upfront investment, it offers significant long-term benefits:

• Lower Long-Term Costs: Owning your solar system means you won’t have to pay ongoing lease payments, leading to greater savings over time. Full analysis by your installer will help you understand your payback period. Typically your solar project will begin generating free electricity for your business after just 5–7 years!
• Accelerated Capital Allowances (ACA): In Ireland, businesses can benefit from ACA tax breaks, allowing you to write off the cost of the solar installation against your taxable income. This can reduce your initial investment by as much as 12.5% and improve your cash flow.
• Increased Property Value: A solar PV installation can enhance your property’s value, making it a more worthwhile investment if you decide to sell in the future. Green energy being supplied to a building can increase the rental value and attract longer term tenants. It can also impact the societal value of your organisation, giving a clear signal as to your green credentials.

2. Loans

If upfront costs are a concern, financing through a bank or financial institution can be a viable option. Here’s how it works:

• Solar Loans: Many banks offer specific solar loan products that cater to renewable energy projects. These loans usually have competitive interest rates and flexible repayment terms. Strategic Banking Corporation of Ireland (SCBI) offers a Green Transition Finance package, as well as a Growth and Sustainability Loan Scheme. Both of these qualify eligible businesses for lower cost green business loans.
• Tax Benefits: Like CapEx, solar loans may also allow you to take advantage of ACA tax benefits, depending on the structure of your loan and the ownership of the system.

3. Leasing Options

Leasing can be an attractive alternative for those who prefer to avoid the upfront costs of purchasing a solar system outright, reducing organisational risk.

• Operating Lease: In this arrangement, you pay a monthly fee to use the solar system without owning it. While this reduces your initial cash outlay, you won’t benefit from ACA tax breaks since you don’t own the system. There are usually some buy-out milestones included should the business wish to buy the system outright after a period of time. This is a good way of reducing the businesses initial risk exposure at the start of the project, though it does impact the overall price negatively.
• Power Purchase Agreement (PPA): This is a long-term contract, typically 25 years, where you agree to purchase the power generated by the solar system at a predetermined rate. Like leasing, you avoid upfront costs but may miss out on long-term savings and tax incentives. The solar PV provider will agree to a rate per unit over the term of the lease, with lump sums payable should more or less electricity be used or produced over the course of the PPA. Payments are typically calculated on an annual basis and your business will usually take control of the solar system at the end of the PPA period.

4. Government Grants and Incentives

In addition to financing options, there are a number of government grants and incentives that can help offset your costs. The Sustainable Energy Authority of Ireland (SEAI) offers various programs that can significantly reduce the financial cost of your solar installation, usually calculated per expected kW installed. There are additional grants available through the Dept of Agriculture for farmers - specifically the TAM3 grant (Targeted Agricultural Modernisation Grant) and your solar installer will be able to advise you accordingly.

5. Crowdfunding and Community Funding

For community initiatives consider crowdfunding or community funding options. This approach allows multiple investors to pool resources and share in the benefits of renewable energy projects. There are a variety of supports and grants available through SEAI: https://www.seai.ie/grants/community-grants who can guide you through the process and help you avail of grants of up to 50%.